Life insurers welcome new rules that limit how much they can accept as deposits

TORONTO _ Two of Canada’s largest life insurance companies welcomed a Saskatchewan government decision that clarifies the rules for a type of insurance policy that’s been the focus of civil suits against them.

Manulife Financial Corp. and IA Financial Group say they expect substantial aspects of the litigation against them will be resolved as a result of the revised provincial regulations.

Institutional investors argued in a Saskatchewan court last month that there shouldn’t be limits on how much they can deposit into side accounts associated with a type of universal insurance policy offered in the 1990s.

Manulife and IA argued in their defence that the side accounts associated with the insurance policies weren’t intended as investment vehicles and therefore there should have limits on how much money they can accept.

A report from short-seller Muddy Waters after the trial warned Manulife could face  “billions of dollars of losses” if it lost the case. Manulife disagreed with the report, but its shares fell to a 2018 low within days of the Oct. 4 report.

Amendments to Saskatchewan insurance regulations, published Monday, say insurers aren’t allowed to accept deposits in excess of what’s required to pay premiums over the policy’s eligible period.

Manulife reinsuring business, boosting dividend and buying back shares

TORONTO _ Manulife Financial Corp. says it is reinsuring some of its businesses and boosting the company’s quarterly dividend by 14 per cent.

The insurance firm says it has entered into agreements with counterparties to reinsure substantially all of its legacy U.S. individual and group pay-out annuities businesses, and mortality and lapse risk on a portion of its legacy Canadian universal life policies. These transactions are expected to release over $1 billion of capital over the next year.

The dividend payout _ which is coming a quarter earlier than in recent years _ will increase by three cents per share to 25 cents, payable as of Dec. 19 to shareholders of record at the close of business on Nov. 30.

The Toronto-based company also says it has received TSX approval to repurchase up to 40 million of its common shares or about two per cent of the nearly two million shares outstanding.

The announcements were made ahead of Manulife’s release of third-quarter results after markets close next Wednesday.

Manulife’s shares have fallen about 25 per cent from their 52-week high.

The company, which operates mainly as John Hancock in the U.S. and Manulife elsewhere, had more than $1.1 trillion in assets under management and administrations.

Life insurers welcome new rules that limit how much they can accept as deposits

TORONTO _ Two of Canada’s largest life insurance companies welcomed a Saskatchewan government decision that clarifies the rules for a type of insurance policy that’s been the focus of civil suits against them.

Manulife Financial Corp. and IA Financial Group say they expect substantial aspects of the litigation against them will be resolved as a result of the revised provincial regulations.

Institutional investors argued in a Saskatchewan court last month that there shouldn’t be limits on how much they can deposit into side accounts associated with a type of universal insurance policy offered in the 1990s.

Manulife and IA argued in their defence that the side accounts associated with the insurance policies weren’t intended as investment vehicles and therefore there should have limits on how much money they can accept.

A report from short-seller Muddy Waters after the trial warned Manulife could face “billions of dollars of losses” if it lost the case. Manulife disagreed with the report, but its shares fell to a 2018 low within days of the Oct. 4 report.

Amendments to Saskatchewan insurance regulations, published Monday, say insurers aren’t allowed to accept deposits in excess of what’s required to pay premiums over the policy’s eligible period.

France’s AXA sells insurance assets in Ukraine to Canada’s Fairfax

REUTERS

AXA Insurance and AXA Insurance Life will continue to operate and fulfill all their obligations without any changes.

French-based AXA Group, represented in Ukraine by AXA Insurance and AXA Life Insurance, has sold its Ukrainian assets to Canada’s Fairfax Financial Holding Limited. Read also A third of businesses expect Ukraine investment climate to improve – EBA “AXA Group has entered into an agreement with Fairfax Financial Holding Limited (Canada) to sell all its insurance operations in Ukraine. Under the terms of the agreement, Fairfax would acquire a 100% of the non-life entity (AXA Insurance) and the life entity (AXA Life Insurance) in Ukraine,” the company’s press service said on October 23. As reported,

AXA Insurance and AXA Insurance Life will continue to operate and fulfill all their obligations without any changes. “It’s time to make a step forward, which will open up new opportunities for the company and each of its clients. With the new owner, we won’t only keep our leading positions, but also continue to develop the entire Ukrainian insurance market,” the press service added.

The new owner’s headquarters is based in Toronto, Canada, it said, adding that it has been engaged in insurance and investment management since 1985. “The company is listed on the Toronto Stock Exchange (FFH: CN). Its market capitalization is estimated at $15.1 billion. The holding operates in 40 countries across the world,” the report said. UNIAN memo. AXA Insurance, which is the leading insurance company in Ukraine, has been operating since 2007. AXA Insurance started working in the Ukrainian market in July 2013.

 

Michelin, Manulife Financial announce major expansions in Nova Scotia

HALIFAX _ Officials say expansions by two major corporations in Nova Scotia could bring hundreds of new jobs to the province.

In separate announcements Tuesday, the province unveiled rebates for Michelin North America (Canada) Inc. and Manulife Financial Corp.

Manulife says it plans to expand its existing operations in Halifax, adding as many as 600 new jobs over the next five years.

Nova Scotia Business Inc., the province’s business development agency, says Manulife could earn a payroll rebate of up to almost $10 million over five years, but less if it creates fewer than 600 new jobs.

Manulife has added 152 full-time equivalent jobs in Nova Scotia since its first payroll rebate agreement with Nova Scotia Business Inc. in 2014.

Michelin says it has two new projects at its Pictou County site worth $21 million that will add 150 jobs and make another 200 temporary jobs permanent.

Michelin says it will begin production on a new winter tire line, and launch “an innovative process for semi-finished materials.”

“This is amazing news for Michelin in Nova Scotia, as these two projects push Michelin’s employment in Nova Scotia to more than 3,600, the highest levels seen in our almost 50-year history,” Jeff MacLean, president of Michelin North America (Canada), said in a statement.

Nova Scotia Business Inc. says Michelin could earn a maximum rebate of $3.57 million, based on eligible capital spending of $14.3 million on the semi-finished materials process.

“This project reinforces the strength and technical capability of the Michelin Nova Scotia team,” Premier Stephen McNeil said in a statement.

U.S. short seller Muddy Waters takes aim at Manulife Financial Corp.

By Armina Ligaya

THE CANADIAN PRESS

TORONTO _ U.S.-based short-seller Muddy Waters has taken aim at Manulife Financial Corp., warning that an impending trial verdict could lead to “billions of dollars of losses” at the Canadian insurer.

Carson Block, the firm’s head of research, wrote in a report published Thursday that Manulife’s life insurance subsidiary has just concluded a trial that could “significantly damage its earnings, capital, creditworthiness, business, and solvency _ per its own expert’s sworn affidavit.”

“We believe a verdict is likely by the end of this year,” he wrote in the report announcing Muddy Waters’ short position in the firm.

“There are therefore material risks to the financial well-being of MFC. We do not believe investors are aware of these risks, nor do we believe they have been priced into MFC shares.”

Short selling is a trading technique that can produce a profit if a stock’s market value falls below a predetermined price.

Manulife, which has more than 13,000 staff in Canada and a global workforce of roughly 35,000, defended its actions. Manulife also operates as John Hancock in the United States.

“The Muddy Waters report is a short seller’s attempt to profit at the expense of our shareholders, and we disagree with its conclusions,” it said in a statement.

The company said consumers and issuers of universal life policies never intended to have the policies function as deposit or securities contracts.

“We expect we will prevail with respect to this matter and that it will not affect our business operations or our ability to meet obligations to our customers, vendors and other key stakeholders.”

Block whose 2011 report into timber company Sino-Forest triggered an investigation by regulators into what became one of Canada’s largest corporate fraud cases wrote that the trial involves one of Manulife’s insurance contracts purchased in 1997 by a hedge fund called Mosten Investment LP.

The report says that Mosten argues that it can deposit an unlimited amount of money with Manulife through the universal life insurance policy and receive an annualized guaranteed return of at least four per cent with one-month liquidity.

If Mosten prevails with its argument, the hedge fund could sell an unlimited amount of partnership interests backed by the Manulife insurance contract and “likely become the most lucrative money market fund in the developed world!” wrote Block.

“These terms alone could financially cripple Manulife,” he said.

Manulife, however, argues this is counter to the purpose of life insurance, which is to insure mortality risk, according to the report. The insurer also argues, according to Muddy Waters’ report, that insurance companies are not permitted to take deposits and taking unlimited premiums for deposit as investment would be illegal.

Block said Manulife’s argument  “strains credulity” as the product in question had an investment component.

“Insurance companies for some time have been blurring the line between insurance and investment, and universal life seems to me to be an example of such an attempt to blur the line,” he said in a phone interview from San Francisco.

Manulife, Canada’s largest life insurer by market value, said Thursday that Mosten’s position is “legally unfounded.”

Shares of Manulife closed down 65 cents, or 2.80 per cent at $22.54 on the Toronto Stock Exchange. The stock was down as much as four per cent earlier in the day to $22.23.

Manulife’s stock performance has already been weighed down recently, including by negative issues in the industry regarding long-term care insurance, said Gabriel Dechaine, an analyst with National Bank Financial.

“While we are happy to see the company take a confident position, we cannot overlook how this issue is adding to an already “noisy” year for MFC,“ he said in a note to clients on Thursday.

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